nep-int New Economics Papers
on International Trade
Issue of 2013‒09‒25
ten papers chosen by
Alessia A. Amighini
Universita' Amedeo Avogadro

  1. EU Trade Preferences and Export Diversification By Persson, Maria; Wilhelmsson, Fredrik
  2. Services vs. Manufacturing – How Does Foreign and Domestic Sales Impact on their R&D? By Ejermo, Olof; Bergman, Karin
  3. The global welfare impact of China: trade integration and technological change By Julian di Giovanni; Andrei A. Levchenko; Jing Zhang
  4. Structural change in an open economy By Timothy Uy; Kei-Mu Yi; Jing Zhang
  5. Trade Openness and Income: A Tale of Two Regions By Mariam Camarero; Inmaculada Martínez-Zarzoso; Felicitas Nowak-Lehmenn D.; Cecilio Tamarit
  6. The global labor market impact of rmerging giants: a quantitative assessment By Andrei A. Levchenko; Jing Zhang
  7. The GTAP Data Base Construction Procedure By Harslett, Philip
  8. Trade reforms and current account imbalances By Ju, Jiandong; Shi , Kang; Wei , Shang-Jin
  9. R&D offshoring and the productivity growth of European regions By Castellani, Davide; Pieri, Fabio
  10. Global imbalances and structural change in the United States By Timothy J. Kehoe; Kim J. Ruhl; Joseph B. Steinberg

  1. By: Persson, Maria (Department of Economics, Lund University); Wilhelmsson, Fredrik (AgriFood Economics Centre, Lund University)
    Abstract: Since at least the 1960s, the European Union (EU) has offered various kinds of non-reciprocal trade preferences for developing countries. Originally, these trade preferences had at least two policy goals: (i) to increase export volumes for developing countries and thereby boost their export earnings, and (ii) to facilitate export diversification. While extensive research has confirmed that the first of these goals is typically met, the second goal seems to have been largely forgotten by researchers as well as in policy circles. The aim of this paper is therefore to analyse the impact of the EU’s non-reciprocal trade preferences for developing countries on export diversification. Our estimation results suggest that some trade preference programs, such as the Generalised Scheme of Preferences (GSP), are associated with increasing ranges of export products. By contrast, preferences offered to Mediterranean countries typically have no significant effects, and African, Caribbean and Pacific (ACP) preferences actually have negative effects toward the end of our time period, suggesting that ACP countries may respond to preferences by specializing into fewer goods.
    Keywords: Export diversification; non-reciprocal trade preferences; GSP; ACP; EU
    JEL: F13 F15 O24
    Date: 2013–09–17
  2. By: Ejermo, Olof (CIRCLE, Lund University); Bergman, Karin (AgriFood Economics Centre, Lund Sweden)
    Abstract: While the distinction between manufacturing and services becomes increasingly blurred to some observers, we find, using a panel of Swedish firms, clear evidence that foreign sales (exports) are more important than domestic sales for stimulating R&D. This is particularly clear for manufacturing and this importance of foreign sales has increased over time, simultaneous to an opening up of the Swedish economy. Even though service industries have seen an increase in both R&D and trade over time, it is thus mainly manufacturing that has benefited from increased possibilities for absorptive capacity. This result suggests a clear dichotomy between manufacturing and services in terms of how they react to trade and how they turn towards the foreign market vs. the domestic market to find stimuli for innovation
    Keywords: Research and Development; Foreign and domestic sales; services; manufacturing
    JEL: D22 F14 F43 L60 L80 O14 O31 O33 O52
    Date: 2013–06–15
  3. By: Julian di Giovanni; Andrei A. Levchenko; Jing Zhang
    Abstract: This paper evaluates the global welfare impact of China's trade integration and technological change in a quantitative Ricardian-Heckscher-Ohlin model implemented on 75 countries. We simulate two alternative productivity growth scenarios: a balanced" one in which China's productivity grows at the same rate in each sector, and an \unbalanced" one in which China's comparative disadvantage sectors catch up disproportionately faster to the world productivity frontier. Contrary to a well-known conjecture (Samuelson 2004), the large majority of countries in the sample, including the developed ones, experience an order of magnitude larger welfare gains when China's productivity growth is biased towards its comparative disadvantage sectors. We demonstrate both analytically and quantitatively that this fnding is driven by the inherently multilateral nature of world trade. As a separate but related exercise we quantify the worldwide welfare gains from China's trade integration.
    Keywords: Production (Economic theory) ; Technological innovations ; Welfare
    Date: 2013
  4. By: Timothy Uy; Kei-Mu Yi; Jing Zhang
    Abstract: We study the importance of international trade in structural change. Our framework has both productivity and trade cost shocks, and allows for non-unitary income and substitution elasticities. We calibrate our model to investigate South Korea's structural change between 1971 and 2005. We find that the shock processes, propagated through the model's two main transmission mechanisms, non-homothetic preferences and the open economy, explain virtually all of the evolution of agriculture and services labor shares, and the rising part of the hump-shape in manufacturing. Counterfactual exercises show that the role of the open economy is quantitatively important for explaining South Korea's structural change.
    Keywords: Gross domestic product ; Labor mobility ; Manufacturing industries
    Date: 2013
  5. By: Mariam Camarero (Universitat Jaume I de Castelló / Spain); Inmaculada Martínez-Zarzoso (Ibero-America Institute for Economic Research, Goettingen / Germany); Felicitas Nowak-Lehmenn D. (Ibero-America Institute for Economic Research, Goettingen / Germany); Cecilio Tamarit (Universidad de Valencia / Spain)
    Abstract: In this article we present evidence of the long-run effect of trade openness on income per worker for two regions that have followed different liberalization strategies, namely Asia and Latin America. A model that re-examines these questions is estimated for two panels of Asian and Latin American countries over the 1980-2008 period using a novel empirical approach that accounts for endogeneity as well as for the time series properties of the variables involved. From an econometric point of view, we apply recent panel cointegration techniques based on factor models that account for two additional elements usually neglected in previous empirical literature: cross-dependence and structural breaks. The results point to a positive impact of trade openness in both Asia and Latin America although the size is smaller in the second region. We associate this finding with the degree to which trade was managed in both regions of the developing world.
    Keywords: GDP per worker, trade openness, panel cointegration, structural breaks, crosssection dependence, Asia, Latin America
    JEL: F15 F43 C22 O40
    Date: 2013–09–05
  6. By: Andrei A. Levchenko; Jing Zhang
    Abstract: This paper investigates both aggregate and distributional impacts of the trade integration of China, India, and Central and Eastern Europe in a quantitative multi-country multi-sector model, comparing outcomes with and without factor market frictions. Under perfect within-country factor mobility, the gains to the rest of the world from trade integration of emerging giants are 0.37%, ranging from –0.37% for Honduras to 2.28% for Sri Lanka. Reallocation of factors across sectors contributes relatively little to the aggregate gains, but has large distributional effects. The aggregate gains to the rest of the world are only 0.065 percentage points lower when neither capital nor labor can move across sectors within a country. On the other hand, the distributional effects of the emerging giants' trade integration are an order of magnitude larger, with changes in real factor returns ranging from –5% to 5% across sectors in most countries. The workers and capital owners in emerging giants' comparative advantage sectors such as Textiles and Wearing Apparel experience greatest losses, while factor owners in Printing and Medical, Precision and Optical Instruments normally gain the most.
    Keywords: Emerging markets ; Labor market
    Date: 2013
  7. By: Harslett, Philip
    Abstract: The GTAP Data Base provides a consistent snapshot of the global economy. It consists of a set of product-by-industry input output tables that represent the structures of more than 100 economies and are linked by bilateral merchandise and cross-border services trade. It is used to support a variety of models that are built to analyse policy changes. The database is assembled using regional input-output tables and data on trade, energy, protection and macroeconomic aggregates from a variety of international sources. The incompatibilities inherent in the data mean that many compromises are required to produce a fully consistent representation of the global economy. This paper provides a summary of the GTAP Data Base construction process. The process has improved continuously over the different versions. This paper refers to the process used to produce version 8.1. The detailed documentation is available from The purpose of this paper is to provide a link between that detailed documentation and the higher-level summary in the ‘Introduction to the Global Trade Analysis Project and the GTAP Data Base’ paper by Walmsley, Aguiar and Narayanan (2012). This paper contains three sections. Section 1 provides an overview of the GTAP Data Base construction procedure. Section 2 details the data sources used and the manipulations applied to data obtained from international organizations to ensure that they are globally consistent. Section 3 details the FIT process, which is the procedure used to adjust regional I-O tables so that they are consistent with international data sources.
    Date: 2013
  8. By: Ju, Jiandong (BOFIT); Shi , Kang (BOFIT); Wei , Shang-Jin (BOFIT)
    Abstract: In partial equilibrium, a reduction in import barriers may be thought to lead to an increase in imports and a reduction in trade surplus. However, the general equilibrium effect can go in the opposite direction. We study how trade reforms affect current accounts by embedding a modified Heckscher-Ohlin structure and an endogenous discount factor into an intertemporal model of current account. We show that trade liberalizations in a developing country would generally lead to capital outflow. In contrast, trade liberalizations in a developed country would result in capital inflow. Thus, efficient trade reforms can contribute to global current account imbalances, but these imbalances do not need policy "corrections".
    JEL: F32 F49
    Date: 2013–09–04
  9. By: Castellani, Davide (Department of Economics, Finance and Statistics, University of Perugia, Centro Studi Luca d'Agliano, Milan, Italy Halle Institute for Economic Research (IWH), Halle, Germany CIRCLE, Lund University, Sweden); Pieri, Fabio (Depto. de Economia Aplicada II (Estructura Economica), Universitat de Valencia, Spain)
    Abstract: The recent increase in R&D offshoring have raised fears that knowledge and competitiveness in advanced countries may be at risk of `hollowing out'. At the same time, economic research has stressed that this process is also likely to allow some reverse technology transfer and foster growth at home. This paper addresses this issue by investigating the extent to which R&D offshoring is associated with productivity dynamics of European regions. We find that offshoring regions have higher productivity growth, but this positive effect fades down with the number of investment projects carried out abroad. A large and positive correlation emerge between the extent of R&D offshoring and the home region productivity growth, supporting the idea that carrying out R&D abroad strengthen European competitiveness.
    Keywords: R&D Offshoring; Regional Productivity; Foreign Investments; Europe
    JEL: C23 F23 O47 O52 R11
    Date: 2013–05–11
  10. By: Timothy J. Kehoe; Kim J. Ruhl; Joseph B. Steinberg
    Abstract: Since the early 1990s, as the United States has borrowed from the rest of the world, employment in U.S. goods-producing sectors has fallen. Using a dynamic general equilibrium model, we find that rapid productivity growth in goods production, not U.S. borrowing, has been the most important driver of the decline in goods-sector employment. As the United States repays its debt, its trade balance will reverse, but goods-sector employment will continue to fall. A sudden stop in foreign lending in 2015–2016 would cause a sharp trade balance reversal and painful reallocation across sectors, but would not affect long-term structural change.
    Keywords: Trade
    Date: 2013

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